American online payment gateway giant PayPal may quit its business in India after the Financial Intelligence Unit of India (FIU) slapped the firm with a penalty of Rs 9.6 million for violating anti money laundering laws. FIU has accused PayPal of “concealing” suspect financial transactions and abetting “disintegration” of India’s financial system.
PayPal has also been charged with “defeating and frustrating” the tenets of public interest and the provisions of the Prevention of Money Laundering Act (PMLA), which aims to keep the country’s financial system safe from economic crimes, terrorist financing and and black money transactions.
Calling the contraventions as “deliberate and wilful”, the Financial Intelligence Unit (FIU) in a scathing 27-page order issued on December 17 held the company guilty on three broad counts, the fundamental being its failure to register itself as a “reporting entity” with the federal agency as mandated under the PMLA.
“…I, in exercise of powers conferred upon me under section 13(2)(d) of the PMLA, 2002 impose a total fine of Rs 96 lakh only on PayPal Payments Private Limited which will be commensurate with the violations committed by it,” the order issued by FIU Director Pankaj Kumar Mishra said.
It said that “there is ample evidence of the willful violation of the law and, therefore, PayPal cannot be let off with a penalty that should normally be imposed for minor violations”.
The order directs the company to pay the fine within 45 days and also register itself as a reporting entity with the FIU, appoint a principal officer and director for communication within a fortnight of the receipt of the order.
As per the order accessed by PTI, the legal tussle between the FIU and PayPal began in March, 2018 when the latter asked the company to register as a reporting entity for keeping “record” of all transactions, reporting suspicious transactions and cross-border wire transfers to the FIU and for identifying beneficiaries of these funds.
Subscribe to GreatGameIndia
As per the order issued under section 13 of the PMLA, PayPal refused the FIU’s directive and hence a show cause notice was issued to it in September last year.
The order said while the company “defies” the process in India, its parent company in the US – PayPal Inc. – reports suspicious transactions to the American FIU and also to similar agencies in Australia and the UK.
After the penalty was slapped, PayPal may soon be shutting parts of its Indian business from next year onward, the Morning Context reported on Monday.
PayPal India has intimated card network partners that they are “pausing” their domestic business and that they will stop onboarding new merchants from March 2021. The company will continue to offer its cross-border payments service in India.